EU bank bonus cap 'will not reduce risk'

Negotiations to introduce a bonus cap in the European Union have stalled after EU countries and the bloc's parliament clashed over how far to go in curbing pay for the industry's top earners.

Although a cap on bonuses still appears likely, it's still unclear whether the limit will be set at the level of a banker's annual salary as early indications suggested, or higher. Lawmakers in the European Parliament, backed by Germany and France, have argued that caps on bonuses will prevent the reckless risk-taking that led to the financial crisis, but they face opposition from Britain, home to the region's financial capital. The talks resume next week.

Interviewed on the Today programme Philippe Lamberts, a Belgian MEP and one of the lead MEPs in the negotiations, said that some might now see it as a rational choice to break the law.

"If you get caught you've got an ample supply of money to pay the best lawyers to avoid prison and still remain with enough to still live a decent life afterwards.

But, he added, a cap of the type proposed would make bank bonuses "a bad business decision"

But Mark Boleat, policy chairman of the City of London Corporation, said that what was being proposed was "a very simple and simplistic mechanism. And the general view is it will actually have no effect in reducing risk in the system at all."

First broadcast on BBC Radio 4's Today programme on Wednesday 20 February 2013.